Governor hits back at criticism

Reserve Bank governor Graeme Wheeler has rejected criticism
by Green Party co-leader Russel Norman that the central bank
is biased in favour of Australian banks.

The Reserve Bank took seriously its mandate from Parliament
to supervise the New Zealand banking system and did so
without favour, Mr Wheeler said in a statement yesterday.

''Australasian-owned banks emerged in better shape from the
global financial crisis because of their more conservative
management and our economies benefit from that strength."

New Zealand's strong banking system helped see the country
through the global financial crisis, he said.

Dr Norman accused Mr Wheeler of misleading Parliament in his
first appearance at the finance and expenditure select
committee when he told members bank profits were ''about
average or below'' most other OECD economies.

Dr Norman claimed data obtained from the Reserve Bank by the
Green Party under the Official Information Act showed New
Zealand banks' pre-tax returns on assets from 2009-11 made
them the fifth most profitable banks in the OECD with only
Iceland, the Czech Republic, Singapore and Australian banks
more profitable.

Mr Wheeler later released data for the period 2009-11 which
showed returns on equity and assets of New Zealand banks
appearing to be in line with other advanced economies -
excluding euro area countries. The order of countries was the
same as given by Dr Norman.

The bank commissioned the data before the committee hearing
into the Financial Stability Report on November 7.

However, the analysis was not complete at the time of the
hearing at which Mr Wheeler was asked about bank profits.

''My response to the select committee represented my
understanding of the information available at that time. Our
analysis was completed after the hearing and we released it
to the Green Party in response to their request, which
followed the hearing. We are now releasing it publicly."

Different measurement practices around the world, including
or excluding tax and extraordinary items, meant international
comparisons of bank profit figures were not straightforward,
he said.

Profits in the New Zealand banking system reflected
relatively low levels of non-performing loans, and low
cost-to-income ratios compared with many other countries.

Mr Wheeler will tomorrow release the bank's Monetary Policy
Statement in which he is expected to clarify issues around
what ''for now'' meant in relation to holding the official
cash rate unchanged at 2.5%.